Friday, September 10, 2010

Inside Job is an intriguing look at the causes and the effects of the recent financial crisis. With narration by Matt Damon, and interviews with some of those that contributed to the problem and those who foresaw the results but went unheeded, director Charles Ferguson's film lays out the initial origins of the problem back in the 70's and 80's when deregulation of the financial industry began, moves through its expansion in the 90's and early 2000's, right up to the boiling point in 2008/2009. The film presents a clear explanation of collateralized debt obligations (CDOs) and credit default swaps (CDSs) and shows how they created a house of cards just ripe for a collapse.

Inside Job reminded me somewhat of Enron: The Smartest Guys in the Room, in that both films took a rather esoteric topic and made it understandable to a layperson, and highlighted how greed created a self-perpetuating cycle that piled more and more bad decisions on top of one another to the point that failure was inevitable. The film shows the intertwining connections between academia, government, and the financial services industry, with the same players moving back and forth between each of them, further entrenching the same principles that led to many of the problems.

Director Charles Ferguson, producer Audrey Marrs, and Gillian Tett, US managing editor of the Financial Times, did a Q&A after the film:

Ferguson's hope for the film is to be able to show the world these issues and hope it leads to action.

When asked about how they got people to interview for the film, Marrs said that in getting people, they gave them a brief synopsis of the film and Ferguson's CV, and she was surprised more people didn't ask for more information. She thinks that many thought they were going to them just for the expertise, and that they had never been challenged before. For those people that declined, they pushed really hard to get specific no's, as opposed to people just saying they were too busy and deferring.

Gillian Tett described that before moving to the editorial side, for 5 years she covered global markets, and she used to be frustrated at trying to take these complicated, specialized topics and ideas and communicate them to other people. It was an area of activity that was incredibly important to the global economy but very hard to communicate. She thinks the film does a good job of taking this geeky, complex stuff and communicating its core essence to a wider audience, and wishes there had been some version of this 5 years ago.

She continued that it is tempting to take a topic like CDOs, which seems dull and geeky and boring, and stick it on the back page. People would tend to say its geeky and boring, so leave it to the technical experts. And technical experts are not used to be questioned, because people aren't looking at what they are doing, so they are left alone and get on with their stuff, but we now know in finance that is dangerous.

She raised the question of how many other geeky areas of activity are there in society today where people are averting their eyes, like how many people knew what was happening in the Gulf of Mexico before the BP well blew up, and how many other areas is there a need for people to make serious films looking at these technical areas where experts are not used to being challenged?

Some interview subjects tried to back out afterwards, but they had all signed releases before doing the interviews. Ferguson got an e-mail from Martin Feldstein the day after the interview rescinding his permission, but they already had a signed release so they left the footage in; Ferguson had thanked his legal team before the start of the screening.

On the academic connection: Ferguson started in academia, has a PhD in political science from MIT, and did economic policy. He noticed some of his professors popping up as expert witnesses in antitrust cases or regulatory proceedings. Over time he kept in touch with academia, and has friends who are academics, and he noticed this became more prevalent, and once the crisis hit, he looked deeper, and found what you saw in film and much more. The Law and Economics Consulting Group, one of the firms mentioned in the film, is a $300 million a year publicly held company; overall, it is a billion dollar industry, and their website listed all the academic experts you could hire, and there are a lot of serious peopleon there.

When asked about the film's position that President Obama hasn't addressed the issue in more depth (and the film is fairly non-partisan in that both Republican and Democratic administrations alike get blame for contributing to the problem), Ferguson said that he doesn't know the President personally, but says once he made certain appointments for positions like the Secretary of the Treasury, the Fed, etc. the die was cast. He saidhe really doesn't know the answer to that, but in discussions with others, some people think it's actually contrary to the President's own political self-interest to do what he has done and probably had the capital to do much more.

Gillian Tett said she thinks President Obama was trying to to tackle many targets at once, and to reform the financial industry would require a strong, concerted focus, but the lobby is very powerful. Before becoming a journalist, she trained as a social anthropologist, and one of thinkers that had an impact on her was Pierre Bourdieu, the French anthropologist, who argued the way elites stay in power is not by controlling the means of production(i.e. money), but by controlling the cognitive map (how we think). This plays into Ferguson's point about the academic role in all this; academics were reinforcing and supporting a cognitive map that served the financial industry very well. There is a powerful nexus of thinkers, politicians, idea people, money men and women, who worked together in recent years to create the system.

Ferguson concluded by agreeing that the US political system has become more a servant of the financial service industry, but it's not irreversible, and the American people have in past come to realize similar problems in the system and asserted themselves, and thinks that the President has the capacity to do much more.